TL Twitter Updates

April 25, 2011

Do you have a question? Get it answered here!

Our goal here at the Traders’ Library blog is to provide you with informative content that you can use to help improve your trading—your one stop resource for everything trading.

If you have a question that you would like answered by one of our experts add it here! Want to know:

How can inverted ETFs help you beat tough markets?What are the most effective option spread strategies?What is the best way to make consistent gains with options and still manage risk?What makes Fibonacci even more powerful?How candlestick can improve the processes you are already using?

We will contact our experts and authors and get your questions answered!

Comments

You can follow this conversation by subscribing to the comment feed for this post.

Hello:

I read the first chapter in Michael Jardines book and did the set up "Bollanger Bands set to 2.23 and 20 and a SMA of 13 days with a three day setback. The MA never gets close to either BB? I have looked at - at least 150 charts?

My question has to do with exiting or adjusting credit spreads. Is there a good guideline to use (Delta, probability, price, etc.) to determine when to exit or adjust a credit spread? I do them on the various indexes, so I don't suffer the same volatility that comes with individual stocks. Thanks!!

I've already purchased Dale Wheatley's 4-DVD Seminar and like the trading strategy a lot. Whether true or not, I've heard that those attending his seminar in person receive a large manual concerning his system. If there is one, is it available? The few pages of his "Patterns of Power" you make available are OK, but copies of the charts Dale uses would be extremely helpful to
print up and study. Please send me an e-mail as I do not do Facebook, Twitter, etc. Many Thanks!

To answer your question, each trader must determine there own risk tolerance/pain threshold but my rule of thumb is to begin the adjustment process once the collected premium has doubled in value. Unfortunately, trading is an art and not a science so rules such as this should be taken into account on a case by case basis. For instance, if the options under fire are considerably out of the money but have exploded in value due to an excessive spike in volatility, it might do more harm than good to adjust the position. Also, if the double out price is reached just as the futures is testing significant support or resistance, it might not make sense to make a move. Another lesson that traders often learn the hard ways is selling options in the direction of the trend might work for a certain period of time, but when the tide turns it can be difficult to keep adjustments up with market price. For example, strangle traders in gold likely adjusted their calls and puts higher to keep up with the rally only to feel even more pain when the market reversed.

I use stochastics in addition to the moving averages and trail stops are triggered when the moving averages breakdown along with stochastics reversals. All this information is in my new book "Trading Full Circle". I like to sell into the breakouts at upper bollinger band levels.

In choppy markets, you might even considering beta hedging your positions. To beta hedge, take the beta for your stock multiply times stock price and shares to derive the notional value dollar amount. The hedge would be to short the SPY with that dolalr amount.

@Joseph -- Jea Yu trades both the e-minis and S&P 500 and has a new swing trading DVD coming out soon called Swing Trade Secrets. Stay tuned to this blog for more on that. For now, you might want to check out his book "Trading Full Circle," or his DVD "Short-Term Profit Hunter." His website is www.undergroundtrader.com.